Good morning, and welcome to the Natural Resource Partners L.P. Fourth Quarter 2023 Earnings Conference Call. All participants are in a listen-only mode. After the speakes presentation we will conduct the question-and-answer session. [Operator Instructions] As a reminder, this conference call is being recorded. I'd now like to turn the call over to Tiffany Sammis, Manager of Investor Relations. Thank you. Please go ahead.

Thank you. Good morning, and welcome to the Natural Resource Partners fourth quarter 2023 conference call. Today's call is being webcast, and a replay will be available on our website. Joining me today are Craig Nunez, President and Chief Operating Officer; Chris Zolas, Chief Financial Officer; and Kevin Craig, Executive Vice President. Some of our comments today may include forward-looking statements reflecting NRP's views about future events. These matters involve risks and uncertainties that could cause our actual results to materially differ from our forward-looking statements. These risks are discussed in NRP's Form 10-K and other Securities and Exchange Commission filings. We undertake no obligation to revise or update publicly any forward-looking statements for any reason. Our comments today also include non-GAAP financial measures. Additional details and reconciliations to the most directly comparable GAAP measures are included in our fourth quarter press release, which can be found on our website. I would like to remind everyone that we do not intend to discuss the operations or outlook for any particular coal lessee or detailed market fundamentals. Now I would like to turn the call over to Craig Nunez, our President and Chief Operating Officer.

Thank you, Tiffany, and good morning, everyone. NRP generated a record $313 million of free cash flow in 2023, a 17% increase over our previous record set in 2022. These results are a testament to our success in executing on the strategy we set out in 2015 to delever and derisk the partnership. We have stuck to this strategy through good times and bad, never wavering in our commitment to do exactly what we told you we were going to do. Years of hard work and persistence are paying off. The business is generating robust levels of free cash flow, the capital structure is solid and our financial outlook is much improved. As of today, our total remaining obligations, which include debt, preferred equity and warrants, stand at approximately $270 million, a 40% decrease from just 1 year ago. I would like to express my sincere thanks for the support of our employees, external stakeholders and Board of Directors, without which none of these results would have been possible. We retired $178 million of preferred equity at par in 2023 and settled 1.5 million warrants, both with cash. And early this year, we settled an additional 1.2 million warrants utilizing cash and common units. There are two factors we consider when deciding whether to settle warrants with cash or common units: First, do we have ample liquidity, which we define quite conservatively, I might add; and second, is the market value of the common units less than our estimate of intrinsic value? If the answer to both of those questions is yes, we settle with cash. While we will not comment specifically directly on our view of intrinsic value, I will say that it was our inability to answer yes to the liquidity question that caused us to issue units…

Great. Thank you, Craig, and good morning, everyone. In the fourth quarter of 2023, NRP generated $78 million of operating cash flow and $65 million of net income. And for the full year of 2023, NRP generated $311 million of operating cash flow and $278 million of net income. Moving to our segment results. During the fourth quarter of 2023, our Mineral Rights segment generated $70 million of operating cash flow and $63 million of net income. For the full year of 2023, the segment generated $260 million of operating cash flow and $246 million of net income. When compared to the prior year, our Mineral Rights segment net income decreased $22 million primarily due to lower metallurgical coal and natural gas prices, lower transportation and processing revenues and certain carbon neutral initiative transactions that we entered into in the prior year. Regarding our med thermal coal royalty mix, metallurgical coal made up approximately 70% of our coal royalty revenues in both the fourth quarter and full year of 2023. The mix for sales volumes in the fourth quarter and full year of 2023 were 45% and 50% met, respectively. Shifting to our soda ash business segment. Net income in 2023 increased $14 million as compared to the prior year, primarily due to higher sales prices in the first half of 2023. Free cash flow from this segment in the fourth quarter and full year of 2023 increased as compared to the prior year period's $5 million and $37 million, respectively. These increases were also driven by higher sales prices, resulting in higher cash distributions from Sisecam Wyoming in 2023. Moving to our Corporate and Financing segment. Costs for the fourth quarter and full year of 2023 improved $3 million and $18 million, respectively. These improvements are primarily driven due…

[Operator Instructions] Our first question comes from Victor Ho from Yarra Square. Please go ahead. Your line is open.

And congratulations on continuing very strong results. Had a couple of questions. Firstly, on use of cash. I understand sort of the conservative stance you're taking around sort of use of cash and whatnot. But if you continue it anywhere near the current rate of free cash flow generation, then you're going to be able to pay down both the preferred and the debt in pretty short order here. What is your expected use of cash once you've effectively become net debt free and preferred free? That's the first question.

The first thing that we will always do when we have what we deem to be excess cash is we'll look to see if we have something intelligent that we can do with the money that would earn returns on capital that exceed what we believe is our cost of capital. And to the extent we do not have those opportunities, we would distribute it out to unit holders.

And do you see anything on the horizon that would justify sort of that use of cash that's something interesting that would earn above the cost of capital at the moment? Or if today, you had no net debt and the preferreds were paid out, would you be looking to return all the cash to shareholders or unit holders?

Well, right now, we are still a bit out from getting to that point where the obligations are completely paid down. You are right in what you summarized initially that at our current run rate that it's not too long before we get to the point where we're obligation free. But I don't want to speculate now on what we would do in 1.5 years, 2 years from now if we had excess cash. I can tell you at this point in time, we don't see opportunities in the market. If we were in that theoretical situation where we had excess cash today, they are not on the horizon overly attractive opportunities to deploy capital. That being said, I will point out that we are focused on the task at hand right now, and we're not out beating the bushes for places to deploy capital. I think you can rest assured that we are going to be quite thoughtful about anything we do with respect to deploying capital in any manner other than distributing it out to unit holders.

Right. Second question, if I may. The carbon-neutral opportunities, you signed some very interesting deals with guys owning pipelines in sort of your geographies. What is the pipeline of -- if you pardon the pun, of potential new deals there? And is there any progress on deals that you've signed in terms of those sort of coming to a full or fruition?

These are -- as you've heard before, these are what we call our call options on greatness and they're all out of the money call options on greatness at the present time. We actually don't believe that any of the subsurface carbon sequestration projects are actually economically viable in this environment. We think there needs to be further improvements in technology, further development in the permitting process and likely also some regulatory changes to make projects viable, not just projects on NRP, but projects in the COT sequestration space in general, large-scale projects in general. With that being said, we do understand from our two lessees that they are continuing to make progress on their projects. I can't give you detailed information on that because we are bound by confidentiality agreements with them. And we're not active participants in those projects. We're just the lessors on those. As for pipeline -- other projects in the pipeline, I would say that given our broad swath of acreage that we have that is in the right place with the right geology for carbon sequestration, we are always in discussions with typically multiple parties about potential transactions. But that's all I can -- I'm willing to give you insight on to now. I can't tell you about anything we're about to pull the trigger on or anything like that.

And then just a final question, if I may. In terms of your coal lessees, to what extent do you know of sort of -- have they all sort of come off sort of contracted price caps on their output? And are they all at sort of market pricing now? Or can you give any color on sort of the price per tonne that your lessees are getting today?

What we can tell you is that we have a mix of contracted and spot markets with our lessees. We do not have day-to-day information on that, just so you'll know. There are -- we have more met volumes that are contracted than thermal, we suspect. But again, we don't know exactly what the mix is and that mix changes from time to time. And the lessees are not obligated to tell us. We typically see after the fact what the prices are on the check stubs that we receive when they pay us the royalties. So I think from your perspective, the way I would think about modeling out our pricing is that I would make assumptions on what you believe the index prices for coal are going to do in the future. And I would assume that those would eventually -- those percentage changes in the index would flow through in our pricing, but with a lag, probably a 6-month lag.

We have no further questions in queue. I'd like to turn the call back over to Craig Nunez for closing remarks.

Thank you, operator, and thank you, everyone, for joining the call. Thank you for your continued support of NRP. We've come on -- we've been on a long journey. So far, it has been quite successful, and the outlook looks good and it's due in large part to all of you. So thank you for your support, and have a great day.

This concludes today's conference call. Thank you for your participation. You may now disconnect.